Mark to Market
February 13, 2009
Have you ever stopped to wonder why in 2008 all of Wall Street pretty much failed? Why not in 1973 during the Arab Oil Embargo? Why not in 1987 after the crash? The Dow dropped 28% on black Monday – 52% that quarter, but only EF Hutton failed.Did you know that FASB 157 went into effect November 15, 2007? Interesting……..
As evidenced by the chart, we have been here before, albeit for all different reasons. In the 1973-1974 downturn the trigger was the Arab Oil Embargo. The contraction of 2000-2002 was prolonged by 9-11. The current collapse has been frequently compared to the Great Depression. History will one day show that both may have been born of the same mother. Mark-to-market accounting rules caused banks to fail in the Great Depression, not from bad loans, but from writing down values at the behest